Success Of Online Music Stores May Be Short Lived

(CelebrityAccess MediaWire) —

While online music stores like Apple's iTunes have attracted millions of customers by selling downloads of songs or albums, changing market conditions will make subscription-based music services the dominant model for selling online music in the future. That is the conclusion of "Online Music: Will Napster Be the Next iTunes as Subscriptions Replace Downloads?" a new report from global technology research and consulting firm Strategy Analytics. According to this report, the shift toward subscription music services will be driven by a combination of changing consumer expectations as well as pressure from broadband service providers and record companies.

"The retail download model popularized by iTunes is costly and inefficient," says Martin Olausson, senior analyst with the company's Broadband Media & Communications service. "As the online music market matures, most consumers will place greater value on having access to a wide range of music instead of purchasing a smaller number of songs."

"In addition to changing consumer needs, the report notes that many broadband service providers prefer to offer a subscription service, such as Real Networks' Rhapsody, which generates steady monthly revenues and helps deter broadband churn. Finally, major record companies are dissatisfied with the revenue they receive from low-cost download sales, and will increasingly focus on alternative business models for selling music online."

As the online music market evolves, Strategy Analytics recommends that stakeholders in the industry embrace the subscription-based business model and position themselves to take full advantage of the broadband opportunity for online music. –Bob Grossweiner and Jane Cohen